Buchholz: Weak U.S. Dollar Helps Exports

Tuesday, 5 Dec 2006 | 9:12 AM ET

While the notion of a weak U.S. dollar might scare some Americans – U.S. manufacturers may be secretly cheering its slide. A dip in dollar value gives companies like Caterpillar , Deere & Co, General Motors and Ford some leverage against competitors in China and Japan – which enjoy much lower currency valuations – and as a result – cheaper exports.

Andy Busch – a global foreign exchange strategist at BMO Capital Markets – was on “Squawk Box” this morning. He says he has no doubt the National Association of Manufacturers was cheering loudly Monday during its meeting with U.S. Treasury Secretary Henry Paulson. The group had been hankering Paulson for some time to get the dollar down against both the yuan and yen.

Weak Dollar: Good or Bad?
The recent slump in the dollar has investors asking whether a weak dollar is good or bad for U.S. companies. Andrew Busch, BMO Capital Markets Global FX Strategist, shares his view with CNBC's Carl Quintanilla

Today’s guest host on “Squawk” – former White House economic adviser Todd Buchholz--who’s now with Oceans Fund – sees the dollar situation as yet another opportunity for automakers – and Hollywood for that matter – to compete in foreign markets. “Now is the time for U.S. companies to be at the top of their game – and not failing us – as some of them are,” he says.

The worst-case scenario for the U.S. economy is a total loss in confidence in the dollar by foreign investors – and a resultant pullout of the American equities markets. Buchholz doesn’t see that happening though.

For foreign manufacturers – such as those in the Euro markets – a sharp appreciation in the Euro could affect a country like Germany – which is export heavy.

Here’s the “need to know” for investors according to Buchholz – “The U.S. economy is so big that the value of the dollar turns out not to be the determinant it is in other countries...where experts are a much larger part of the economy.”

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